Junius and Kumar v Messenger Press & Ors No. Scgrg-94-318 Judgment No. S484

JUNIUS & KUMAR v MESSENGER PRESS & ORS
[1999] SASC 484

Full Court: Duggan, Debelle and Bleby JJ

DUGGAN J. I agree with Bleby J that the application for leave to appeal is incompetent and must be dismissed. I also agree with the reasons he has advanced in reaching this conclusion.
I add the following comments on the purpose and operation of the proviso (2)(b) to s 50(1) of the Supreme Court Act, 1935.
The proviso states that no appeal shall lie without leave of the judge from any order “as to costs only which by law are left to the discretion of the judge”. The origin of this provision can be traced back to s 49 of the Judicature Act, 1873 (UK). Eventually the provision found its way into s 18(1)(f) of the Supreme Court Act 1981 (UK) which has now been repealed. There is similar legislation in some of the Australian jurisdictions. (see Quick on Costs (1996) Vol 1 paras 4.5330, 4.5380, 4.5520, 4.5540).
The obvious purpose of these provisions is to restrict appeals on costs, an issue in respect of which the trial judge is usually well placed to assess the merits and exercise a discretion in what is, essentially, a procedural matter. (Baltic Shipping Companyv Dillon (1991) 22 NSWLR 1 at 32; In re Beddoe. Downs v Cottam [1893] 1 Ch 547 at 554). However, the proviso will not prevent an appeal without leave from the trial judge where the discretion has not been exercised at all, or where it has been exercised otherwise than judicially. (Donald Campbell & Co v Pollack [1927] AC 732; Scherer v Counting Instruments Ltd [1986] 1 WLR 615; Bankamerica Finance Ltd v Nock[1988] 1 AC 1002 at 1007).
It is appropriate to consider the operation of the proviso against the background of some of the statutory and regulatory provisions relating to costs. Section 40(1) of the Supreme Court Act provides for a general and unfettered discretion to award costs, subject to the Act and the Rules of Court. Rule 101.01(1) also confirms that costs are within the discretion of the court. However, the discretion must be exercised judicially and in accordance with recognised principles, some of which are mentioned in the rules. Rule 101.02 refers to the well recognised principle that costs should follow the event unless the court otherwise orders. Although this is a relevant factor to be taken into account, it does not limit the broad discretion provided for by statute. (Copping v ANZ McCaughan (1995) 63 SASR 523 at 527).
Rules 40.05 and 41.04 which were devised to encourage settlements, provide for a prima facie approach in making a costs order in the circumstances identified in those rules whilst, at the same time, providing scope for the exercise of the court’s discretion. This concept of a wide discretion, which is nevertheless to be exercised in accordance with principles identified in the rules, is also reflected in r 101.01(3) which provides:
“The Court in exercising its discretion as to costs may take into account (inter alia) any:
(a)     payment into Court;
(b)     offer to consent to judgment, including a notice under Rule 41;
(c)     offer of contribution.”
In my view, there is a distinction to be drawn for present purposes between instances where there is no scope for the exercise of a discretion and those cases where the rules identify the costs order which should be made in the particular circumstances, but nevertheless allow a discretion to the court to depart from the usual order if there are reasons which justify that course. I would include in this category rules which specify that a particular order in relation to costs is to be made unless the court thinks proper to order otherwise. If the court does decide to depart from the usual order it is exercising a discretion and there seems to be no justification for treating those circumstances as being in a different category, for the purposes of the proviso, from the exercise of a more general discretion.
It must be accepted that examples where costs are not left to the discretion of the trial judge are few and far between. However the general rule that executors and trustees are entitled to costs out of an estate or fund except in cases of misconduct is preserved under r 101.01(2) and is an example of a costs order which does not come within the proviso (In the Will of Field [1931] VLR 37 at 52). And in any event, it was open to the legislature to anticipate the possible creation of such categories in the future.
For these reasons, it is my view that the order as to costs in the present case comes within the wording of the proviso in that it is an order which is “left to the discretion of the judge”. The words in r 40.05 “unless it thinks proper to order otherwise” import a discretion entitling the court to take into account a potentially wide variety of matters in deciding whether what would otherwise be the usual order is to be made. (cf Copping v ANZ McCaughan supra at 528). This is not to downgrade the importance of that which provides the rationale for the usual costs order is to be made in accordance with the rule: it is simply to recognise the existence of the discretion which is given to the court by the same rule.

DEBELLE J. The facts are recited in the reasons of Bleby J which I have had the advantage of reading.
For the reasons which follow, I do not think that the order as to costs in this case is an order which falls within the proviso (2)(b) to s 50(1) of the Supreme Court Act 1935. The proviso states:
“No appeal shall lie without the leave of the judge from any order ...
(b) As to costs only which by law are left to the discretion of the judge.”

The words “which by law are left to the discretion of the judge” indicate that there will be some orders as to costs which will not require leave. Had the intention been to require that leave should be obtained in the case of all orders as to costs, the proviso would have simply read “No appeal shall lie without the leave of the judge from any order ... as to costs only”. In other words, if some meaning is not attributed to the words “which by law are left to the discretion of the judge”, they are merely otiose. Those words are intended to apply to cases where the broad discretion as to costs is not fettered in some way by statutory instrument or other rule.

It is not necessary to seek to identify all instances which do not fall into the category of costs orders which involve only the unfettered exercise of discretion of the judge. It is sufficient to note that Rule 41.04 fetters the discretion of the judge in that the judge is required to order that the solicitor and client costs be paid if the conditions prescribed in the rule are satisfied, unless the judge thinks it is proper to order otherwise. Rule 41.04 limits the operation of the general discretion as to costs provided by s 40 of the Supreme Court Act 1935 in a way quite unlike Rule 101.02 which does not fetter the discretion: Copping v ANZ McCaughan (1995) 63 SASR 523. Thus, although the judge retains a discretion, it is quite unlike the general discretion as to costs. In the exercise of the general discretion as to costs, the court may make any one of a number of orders as to costs including an order that a party pay solicitor and client costs: see, for example, Colgate Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225. If Rule 41.04 did not exist, it might be appropriate as an exercise of the general discretion as to costs for the court to order the payment of solicitor and client costs if the circumstances of the kind which are prescribed by Rule 41.04 were found to exist. What Rule 41.04 does is to remove one set of circumstances from the discretion of the court. It requires an order as to solicitor and client costs unless there are circumstances which the judge thinks make it appropriate to order otherwise. Rule 40.05 is another instance of a like provision. For these reasons, orders made pursuant to Rule 41.04 do not fall within the proviso.
Furthermore, if Rule 41.04 was caught by the proviso, there would be no right of appeal in those instances where a judge had failed to have regard to it or where a judge had made an order in circumstances where the rule did not operate. In such cases, a right of appeal should exist. In other words, Rule 41.04 contains a statutory prescription as to circumstances in which a plaintiff will be entitled to solicitor and client costs. If a judge fails to heed that prescription, it could not be said that a right of appeal would not exist.
It is apparent that the proviso is intended to be a barrier to appeals against orders as to costs. There are sound policy reasons why that should be so. But the barrier does not extend to all appeals as to costs, only to those which fall within the ambit of the proviso.
For these reasons, the plaintiffs had a right to appeal against this order for costs. It was not necessary for them to obtain leave to appeal since the order as to costs was not in any sense interlocutory. It was a final order.
I turn to the question whether the order as to costs should stand. The judge decided that the plaintiffs had conducted themselves in such a way that it was proper not to make an order that they recover the whole of their costs on a solicitor and client basis. The judge permitted them to only recover 60 per cent of their costs on that basis. The judge’s reasons were grounded on the observations of Bray CJ in Cretazzo v Lombardi (1975) 13 SASR 4 at 12. The judge said:
“In my view the situation which has arisen in this case is akin to that which arose in Cretazzo. I have found that the plaintiffs have not been completely frank with the court as to some issues and they have exaggerated with respect to others. In particular, the issue of P67, which was a topic relevant to the issue of affiliation, occupied a substantial part of the trial. As Mr Harris pointed out, this topic was canvassed over many days and some 400 pages of transcript.”

The judge then concluded that this was a case where there should be some order as to costs made against the plaintiffs to reflect the issues upon which the defendants might be described as having succeeded, notwithstanding the ultimate judgment in favour of the plaintiffs.

The judge has erred in this approach. This case was altogether different from Cretazzo v Lombardi. In that case, the plaintiff, who was claiming damages for injuries he had received in a motor vehicle accident, had exaggerated his symptoms and recovered a significantly smaller amount than that which had been claimed. In other words, the plaintiff’s misconduct directly concerned his claim. Similarly, in Foster v Farquhar [1893] 1 QB 564, which was referred to in Crettazo v Lombardi, was a case where a successful

plaintiff failed to recover costs because the verdict represented an insignificant proportion (about three per cent) of the original claim. In addition, the plaintiff’s claim for damages for breach of contract was grounded on four heads of damage, three of which failed and were not in any respect caused by the defendant’s breach. By contrast, in this case, the plaintiffs did not fail in respect of their claim for defamation. They completely succeeded. Nor did they fail in any material respect to their claim for damages. In addition, the defendant failed in its plea of justification. The issues on which the plaintiffs fail were concerned with a plea of justification. The plaintiffs tried to make too much of too little. The judge has failed to recognise that the issues on which the plaintiffs exaggerated, or were not entirely frank, concerned their attempt to resist the plea of justification and were not necessary to the prosecution of their claim. This was not a case where the plaintiffs had failed to establish a particular defamatory meaning. It is not a case where a plaintiff relies on several causes of action and, say, succeeds on one ground only, recovering a significantly smaller award of damages. To allow the plaintiffs only 60 per cent of their costs is to penalise them for seeking to answer the defendant’s plea, a plea on which the defendant wholly failed. If the judge believed that some deduction should be made because of the conduct of the plaintiffs, a more appropriate order would have been to allow the plaintiffs their costs on a party and party basis and not on a solicitor and client basis.

The plaintiffs have not appealed against the order for costs. In all the circumstances, I think it would be appropriate to extend the time within which to allow them to appeal. I would then order that the plaintiffs recover 60 per cent of their costs on a solicitor and client basis and the balance of their costs on a party and party basis.
BLEBY J. On 16 March 1999, after a lengthy hearing, a Judge of this Court gave judgment in favour of the plaintiffs in an action for defamation against the defendants. The defamatory material consisted of articles published in a weekly suburban newspaper circulating in Adelaide.
The primary sting of the articles, as alleged by the plaintiffs, was that the plaintiffs were dishonest and fraudulent in operating the “Australian School of Ayurveda”, or the propagation of an ancient Indian study of medicine know as Ayurveda. By way of alternative pleading, the plaintiffs allege that the meaning or secondary sting of the articles was that the school did not confer qualifications recognised in any way and that the plaintiffs misrepresented the nature and standard of the educational institution they conducted. However, this only arose if the plaintiffs failed in their allegation of the primary sting.
The defendants pleaded justification. There was a lengthy trial to establish the necessary facts. The plaintiffs succeeded on their primary allegations. In respect of some issues which arose in connection with their allegation of the secondary sting, the plaintiffs sustained some adverse findings by the trial Judge. Some of those issues occupied a substantial proportion of the trial. However, the adverse findings did not affect the plaintiffs’ success as to the primary sting of the articles.
The trial Judge gave judgment for the plaintiffs for the sum of $405,000 plus interest of $105,300, making a total award of $510,300.
Pursuant to r 41 of the Supreme Court Rules the plaintiffs, on 29 April 1997, had filed an offer to accept the sum of $140,000. That was withdrawn on 16 September 1997 and was replaced with an offer to accept $200,000. The trial commenced on 3 November 1997. The judgment therefore substantially exceeded the amount which the plaintiffs, by their filed offer, indicated they were prepared to accept. In those circumstances r 41.04 provides that the court, “unless it thinks proper to order otherwise, shall order the defendant to pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client”.
The trial Judge heard further argument on the question of costs, at the conclusion of which it was ordered that the defendants pay 60 per cent of the plaintiffs’ costs of and incidental to the whole of the action as may be agreed or taxed in default of agreement, such costs to be taxed as between solicitor and client (“the costs order”). The reasons for the reduction to 60 per cent were that the “plaintiffs have not been completely frank with the court as to some issues and they have exaggerated with respect to others. In particular, the issue of P67, which was a topic relevant to the issue of affiliation, occupied a substantial part of the trial. As Mr Harris pointed out, this topic was canvassed over many days and some 400 pages of transcript”. The issue in which Exhibit P67 had arisen concerned the question whether the institution conducted by the plaintiffs was affiliated with the University of Poona. The defendants had also relied on the plaintiffs not being successful on certain other issues. The plaintiffs failed on one aspect of an issue relating to alleged false titles, the non‑profit nature of the organisation and evidence as to the experience of the plaintiff Kumar. However, these were all issues secondary to the main issue on which the plaintiffs did succeed.
The plaintiffs applied to the trial Judge for leave to appeal against the costs order. On 18 June 1999 leave to appeal was refused. On 2 July 1999 the plaintiffs purported to apply to the Full Court pursuant to r 94.02 for leave to appeal against the costs order. The Full Court which dealt with that application in private considered that the application was incompetent because, by virtue of s 50(1) proviso (2)(b) of the Supreme Court Act, no appeal lies without leave of the judge for an order as to costs only which by law are left to the discretion of the judge. That subsection requires that there be a grant of leave from the judge before there can be an appeal to the Full Court against a decision on costs: Copping v ANZ McCaughan (1995) 63 SASR 523 at 529.
Having been informed of that by letter from the court dated 30 July 1999, the plaintiffs then, on 6 August 1999, applied for leave to appeal to the Full Court from the order of the trial Judge made on 18 June 1999 refusing leave to appeal against the costs order. It is that application which is now before this Court.
The first step in the plaintiffs’ argument is that the order refusing leave to appeal is an interlocutory order to which proviso (3)(b) of s 50(1) of the Supreme Court Act applies. In Copping v ANZ McCaughan the trial Judge had struck out that portion of a notice of appeal relating to costs by way of incidental order to an order refusing leave to appeal. That order, in those circumstances, was held to be interlocutory, the Court relying on Licul v Corney (1976) 50 ALJR 439 at 441, Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 246 at 248 and TRAMS Pty Ltd v Grand Hotel Pty Ltd (1993) 170 LSJS 312. There can be little doubt that the order the subject of this application is interlocutory in nature.
Section 50(1) proviso (3)(b) of the Supreme Court Act enables an appeal to be brought against an interlocutory order of this type by leave either of the judge or of the Full Court.
If we were to grant leave to appeal against the trial Judge’s refusal to grant leave to appeal against the costs order the plaintiffs would then wish to argue on that appeal that leave should have been given. If successful in that argument they would ask the Full Court to grant leave to appeal against the costs order and then to hear the appeal itself against the costs order. We invited and heard argument against all those steps.
Rule 94.01 provides that an application to the Full Court for leave to appeal must be brought within 14 days of the date of the order the subject of the application. The plaintiffs therefore require an extension of time if their application is to be heard. In the circumstances, I would defer consideration of that application, because the first question which arises concerns the competency of the present application. If it is incompetent, the question of an extension of time is academic.
In my opinion, the application for leave to appeal is incompetent and it must be dismissed.
Section 50 of the Supreme Court Act provides what for present purposes is a relevant code as to the circumstances in which an appeal lies to the Full Court. By subsection (1), an appeal lies against every judgment, order or direction of a judge, whether in court or in chambers, and also from the refusal of any judge to make any order. There follow, however, a number of provisos or qualifications on that general right. There are certain judgments or orders from which no appeal lies. These are specified in proviso (1).
Proviso (2) provides that in relation to certain orders there can only be an appeal by leave of the judge who made the order. As mentioned above, proviso (3) specifies certain orders where an appeal may be brought by leave either of the judge or of the Full Court itself.

Proviso (2) and (3) are both expressed in the form: “No appeal shall lie without the leave” of the judge or of the Full Court as the case may be.
Proviso (2), where no appeal shall lie without the leave of the judge, includes in its short list “any order as to costs only which by law are left to the discretion of the judge”. It does not purport to relate to every order as to costs, but only those which by law are left to the discretion of the judge.
The plain intention of the Act is that discretionary orders for costs are to be treated differently from interlocutory orders and other types of orders referred to in proviso (3). Appeals against orders referred to in proviso (2) cannot be brought by way of leave granted by the Full Court. They cannot be brought without the leave of the trial Judge. The policy of the Act is plainly to restrict and to discourage appeals against such orders unless the trial Judge gives leave. As King CJ said in Copping v ANZ McCaughan Ltd at 529:
“It is clear from the language of s 50(2) (by which his Honour was referring to proviso (2) of s50(1)) that the required leave must be obtained from the judge making the order appealed from. The phrase ‘the judge’ is clearly a reference to the judge making the order. The power to grant or refuse leave is expressly conferred on a specific judge and cannot be exercised by another judge or by the Full Court under the general power in s48 which is expressed to be ‘subject to any express enactment’. No doubt there is an implied qualification in the case of the unavailability of the judge making the order, which would enable the power to be exercised by another judge, but subject to that, only the judge making the order can grant leave.”
If the costs order made by the trial Judge in this case is such a discretionary order, the application must be held to be incompetent for much the same reasons referred to in the judgment of King CJ quoted above. What the plaintiffs are doing is attempting to circumvent the plain requirements of proviso (2). The plaintiffs do not have the leave of the trial Judge to appeal against the costs order, and that is an essential pre‑requisite to the hearing of an appeal. The process now embarked upon - an application for leave to appeal against the trial Judge’s refusal to grant leave to appeal is merely a device designed to overcome that qualification. If the plaintiffs were to be totally successful on all the steps which must be taken, they will end up with an order for leave to appeal from the Full Court. It will not be leave from the trial Judge. To allow the process to succeed would be to fly in the face of the plain requirement of proviso (2). It would mean that, rather than appeals against discretionary costs orders having to run the gauntlet of proviso (2), they could, in practice, with a few more procedural steps, be treated like any other interlocutory order with leave to appeal being granted by the Full Court. That is not the intention of Parliament, which appears deliberately to have singled out discretionary orders as to costs in order to restrict the opportunities for appeals against them.
The question remains, however, whether this particular order is one to which proviso (2) applies, namely whether it was an order which by law was left to the discretion of the judge. The order in this case was made pursuant to r 41.04 which requires that “the court, unless it thinks proper to order otherwise, shall order the defendant to pay the whole of the plaintiff’s costs of action to be taxed as between solicitor and client”. Is such an order an order “as to costs only which by law are left to the discretion of the judge”?
Section 40(1) of the Supreme Court Act provides:
“40 (1) Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.”
In Copping v ANZ McCaughan, one of the questions which the Full Court had to consider was whether the discretion conferred by s 40 was fettered by r 101.02(1). That rule provides:
“101.02(1) Subject to these Rules, the costs of and incidental to a proceeding shall follow the event unless the Court otherwise orders.”
The structure of the Rule is not unlike that of r 41.04. The Court held that the discretion conferred by s 40 was not fettered by such a rule. At page 527 King CJ said:
“The existence of s 40 is also an important, even controlling factor, in the construction of the rule. It is true that the section is expressed to be ‘subject to the rules’. Nevertheless the legislative intention is plainly to confer on courts and judges an unfettered discretion as to costs. A construction of a rule of court which practically negates the statutory provision is not lightly to be adopted. It may well be that the rule, so construed, would be invalid. Where a statutory provision is made subject to Rules of Court, the rules may prescribe procedures which condition the operation of the statutory provision or limit the mode of its operation. They may even modify or exclude its operation in defined circumstances. But a general provision in a Rule of Court which substitutes a different rule across the board for that prescribed by the statute would seem to me to be invalid as repugnant to the statute.
There is a strong presumption against construing the rule in such a way and it is unnecessary to do so. Where costs are in the discretion of the court, the discretion must nevertheless be exercised judicially. A successful party has a reasonable expectation of obtaining his costs. The judge ought not to exercise his discretion against a successful party on grounds wholly unconnected with the cause of action” Donald Campbell & Co Ltd v Pollak [1927] AC 732. I think that r 101.02(1) does not more than express in the rules that well established principle. The reference to costs following the event is an expression of the general expectation that the successful party will get the costs. The phrase ‘unless the court otherwise orders’ reflects the unfettered discretion of the judge to fashion the order for costs as he sees fit in the interests of justice. In my opinion the costs ‘by law are left to the discretion of the judge’ within the meaning of s 50(2).”
In the same way, r 41.04 merely states the general principle that where a plaintiff recovers a greater amount than that stated in a r 41 notice, there is a prima facie entitlement to have paid the whole of the costs to be taxed as between solicitor and client. It does not detract from the discretion of the Court if it thinks proper to order otherwise.
It follows that the costs order in this case was one which by law was left to the discretion of the judge. It required leave of the judge before an appeal could be brought. That has not been obtained. To do what the plaintiff would have this Court now do is to circumvent those requirements and in effect to place a discretionary costs order in the same position as orders covered by proviso (3). It follows that the application is incompetent and must be dismissed.
That is not to say that I would necessarily have refused leave or indeed that I would necessarily have made the costs order as made by the trial Judge. It is not necessary to venture upon those questions. The only circumstances where there might conceivably be an appeal as of right is where a judge, either in making an order as to costs or in refusing leave to appeal did so where there was simply no material before the judge upon which the discretion could be exercised in the way it was or that there was some demonstrable error of law which could not possibly justify the exercise of the discretion that way. See Scherer v Counting Instruments Ltd [1986] 1 WLR 615; Hellyer v Sheriff of Yorkshire [1975] Ch 16. The error would have to be tantamount to saying that there was no jurisdiction to make the order or the discretion has not really been exercised at all: Copping v ANZ McCaughan Ltd at 529. There is no suggestion of any defect of that nature in this case either in the making of the costs order or in refusing leave to appeal.

[1999] SASC 484

12 November 1999